Don’t create distortions while raising revenue – World Bank

Fighting poverty requires a global strategy to share knowledge effectively and ensure that people who need that knowledge get it on time. In an interview with Daily Monitor’s Martin Luther Oketch, outgoing World Bank country manager, Ms Christina Malmberg Calvo explains how the World Bank is both financial and knowledge bank.

In the last three years that you have been here, what has been your impression about Uganda’s development agenda? Uganda has an ambitious development agenda. The World Bank Group is providing financing on very soft terms which are interest rate free up to 38 years. We also provide some grants. The answer in one big block lies in human capital development. You need a population which is educated and healthy. You need to have children who don’t suffer from malnutrition. About a quarter of the children in Uganda still suffer from malnutrition though it has started coming down. One big block to Uganda’s development human capital development and you need to invest in education and health. A big proportion of Uganda’s population is below the age of 25 or more than a half of the population is below the age of 16 years. If Uganda is going to reap returns on its demographic structure, it needs to invest in education and health.

Another development agenda is infrastructure. Uganda not only has an infrastructure deficit but also an infrastructure implementation problem.To make sure that the infrastructure you select is assessed properly, you have to do feasibility studies and procure in a competitive fashion. You must also supervise the investment.In June 2016, we launched one of the economic updates on Public Investment Management. Uganda loses $300 million (Shs1.1 trillion) in infrastructure investment annually because the infrastructure is not priced correctly. This means there is a huge cost overrun during the implementation period as a result of delays.

How are you (World Bank) helping Uganda to overcome these challenges? There are still challenges in Public Investment Management in terms of implementing development projects. Last week, we launched a multi-donor Trust Fund with Department for International Development (DFID) worth £9 million (about Shs44 billion) to support the Government of Uganda in implementing its second National Development Plan (NDPII). It will strengthen the capacity of institutions in Uganda, Ministry of Finance, Planning and Economic Development and all other ministries. The Trust Fund will also help government to improve planning and implementation of programmes.

How has World Bank contributed towards Uganda’s development programmes?Financing and knowledge: The World Bank has emphasised the importance of making sure infrastructure projects benefit the community. The other contribution is in knowledge – the Doing Business Index around the world. These indexes create healthy competition for the private sector on the conditions for investment among countries. Jobs must be created by the private sector which is still informal and only creates a small percentage of jobs. A survey shows that there are 9,000 jobs created by the private sector in Uganda.

The World Bank is the largest financier of development projects worth $3 billion (Shs11 trillion). We have a healthy mix in development financing, infrastructure, human capital development and in institutional reforms. We see a lot progress in the education sector, health and infrastructure. My second year here was a year of implementation. The implementation rate of the World Bank funded project was 10 per cent the following year which 14.8 per cent and now we are at 16.2 per cent. All together there are 26 active projects in Uganda. In 2013, the World Bank introduced a programme called Uganda Support to Municipal Infrastructure Development Programme Project (USMID) which started with municipalities the objective of enhancing the performance of Local Governments (LGs) to improve urban service delivery. The first phase of the USMID runs over a period of six years (FY 2013/14-FY 2018/19). Initially, we had $175 million (Shs649b). In addition to that, we designed a new programme for USMID of $360 million (Shs1.3 trillion) for more municipalities.Beside we have the International Financial Cooperation (IFC) which deals directly with the private sector.

Are all government development priorities right?Government development priorities has to align with National Development Plan two by controlling assessment with the National development where we want to see what is the contribution of the NDP midterm review assessment and annual sector performance review. There are wastages between investing in human capital, infrastructures and demographic pyramids. You need to have a well-planned strategies in order to deliver to deliver on priorities When priorities are well planned you get multiplier effects. We have Africa Can, so Uganda can meet its development objectives that it sets for itself and it needs to close implementation gaps.

Where would you like to see improvement in Uganda’s development programmes?We would like government to focus on improving the agriculture sector which still employs over 75 per cent of the people but economic growth and agriculture is still very low. Particularly we would like to see the results on agricultural policies being implemented and application of data. Data is still lacking in the agricultural sector. The World Bank can help the ministry of agriculture to develop macro data to strengthen evidence based policies based on data. As a World Bank, we would like to see that every advice given is based on data. Polices should be based on data and measurements. Now that Uganda is heading into oil production, it is important that government invests in its people, infrastructure and agriculture. Now is the time to fix the agriculture sector by strengthening public institutions and policies for agricultural productivity involving the private sector in commercialising agriculture, increasing productivity in the sector and moving up the value chain by private sector. The other thing is agro processing.

Most development programmes in Uganda are politically, what sort of conservation is the World Bank having with government or you just put the money there and leave government to what it wants with it? This is a very important question. In 2015, we developed a Systematic Country Diagnosis – a six year programme that identifies the constraints to and opportunities for reducing extreme poverty while boosting shared prosperity in a sustainable manner (Business Plan with the government). In Uganda, when three people get out poverty-two fall back in poverty. We work with government on business plans; we go where we have economic business strategy. The analysis is evidence based and largely draws on existing analytical work done by the Bank and other stakeholders. This report draws significantly from the forthcoming Poverty Assessment in Uganda. It was also informed by consultations with the government, civil society, academicians, private sector and international donors.

What is your take on Uganda’s domestic revenue mobilisation strategy where government is taxing mobile money and social media?Uganda has to increase its domestic revenue collection. The 14 per cent you collect cannot develop the country. Government needs to continue improving its domestic revenue collection to put the revenue to Gross Domestic Product ratio on an upward trend by improving tax policy and administration.The World Bank, Department for International Development and other development partners are working with Uganda Revenue Authority to provide technical assistance. However, in increasing domestic revenue collection, you don’t need to come up with distortions by introducing tax on mobile money and social media. There are other measures that could be undertaken by increasing accountability transparency and doing away tax with exemptions. Uganda needs to close those loopholes.

About herChristina Malmberg Calvo, a Swedish national, is the World Bank country manager. She joined the country three years ago in May 2015.